Lifetime Allowance Guidance

Familiarise yourself with the information on USS and HMRC websites and below, take independent financial advice if appropriate, check the value of your pension benefits and consider if applying for tax protection is an option.

The LTA is not a limit as such.  Your pension benefits can be over the LTA, but generally any benefits paid by a pension scheme above the LTA will subject to a tax charge (the LTA charge).

HMRC has provided transitional protection – Fixed Protection 2016 (“FP16”) and Individual Protection 2016 (“IP16”). 

Under Individual Protection 16 (‘IP16') individuals may elect for a personalised LTA based on the value of their pension savings at 5 April 2016 (up to £1.25 million). It will allow individuals to continue pension saving after 5 April 2016 whilst protecting tax relieved pension savings that have accrued up to that date, subject to an overall maximum of £1.25 million.  Individuals will have three years from 6 April 2016 to apply for IP16. Details are available from HMRC website.

IP16 will be available to individuals with pension savings of more than £1 million on 5 April 2016, providing they do not have existing primary or enhanced protection from the LTA charge.

There are USS tax relief options. These were introduced to assist members who may have or are likely to have a Lifetime Allowance or Annual Allowance charge. 

If, after weighing up the choices and USS options available, and after taking obtaining financial advice, it is concluded you need to choose one of the three options available from USS, you should proceed as follows:

Making an election for one of the USS tax relief options 

An election form (separate form for each of the tax relief limits options) can be downloaded directly from the USS website, noting that USS requires 28 days notice in writing before the date of the election. All completed Election Forms should be sent to the Pensions Office, not to USS directly.

USS Money Purchase (Prudential) AVCs (MPAVCs), USS Investment Builder AVCs and USS match

If you currently pay these, you may wish to consider reducing or ceasing these payments if your benefits are or may become above the LTA.  If you decide to reduce or cease your MPAVCs or discuss the level of contributions, you will need to contact Prudential directly - call the customer call centre on 0845 600 0343. To change your USS  choices, log onto myUSS.

If, after considering the actions and options available to you, including those above, and it is identified you are likely to exceed the LTA limit, there are other options below to consider.

Your Annual Member Statement (AMS) will include your LTA value  You must keep track of your benefits.  At various times USS have to check whether a member's pension savings have exceeded the lifetime allowance rate - this happens when what is known as a 'benefit crystallisation event' (BCE) occurs.  For example, when USS start paying a pension to a member it must tell the member what percentage of the lifetime allowance they've used up and provide this information at least once every tax year.

The LTA is £1m with effect from 6 April 2016 and will then be increased by CPI.

The Government restricted pension tax relief for high earners by introducing a tapered reduction in the amount of AA for individuals with income (including the value of any pension contributions) of over £150,000, and who have an income (excluding pension contributions) in excess of £110,000. This change came into effect on 6 April 2016. For more information please visit the HMRC site.

The Pensions Office can explain the background to pension taxation and explain information provided by USS. We cannot give you advice or help with tax planning. For this you may want to consult your accountant, or an independent financial advisor.